Telstra says fibre to the node plans on hold

Summary:Telstra today confirmed the fibre to the node (FTTN) component of its Next Generation Network (NGN) would remain on hold after the government opted not to intervene to allow the carrier to restrict third-party access to its planned new infrastructure.

Telstra today confirmed the fibre to the
node (FTTN) component of its Next Generation Network (NGN) would
remain on hold after the government opted not to intervene to
allow the carrier to restrict third-party access to its planned
new infrastructure.

In a statement issued to the Australian Stock Exchange (ASX),
Telstra said it would instead retain "various legacy elements of
the copper access network" and had informed the vendors to which
it had awarded NGN FTTN contracts of its intentions.

The carrier reiterated earlier statements that "regulations
that will protect investment risk assumed by shareholders" were
necessary for it to proceed with some parts of the NGN program,
"particularly fibre to the node".

A spokesperson from Alcatel, which is providing much of the
hardware for the FTTN network under a November memorandum of
understanding (MOU) with Telstra, said the finalisation of the
deal had always depended on favourable regulatory conditions.
"Nothing's changed," the spokesperson said.

The spokesperson declined to reveal how much of Alcatel's
AU$3.5 billion deal with Telstra related to the FTTN network.

Telstra said the decision meant earnings growth guidance for
the fiscal year 2006 would improve by about four percent to a
range of minus 15 to minus 20 percent without a restructuring and
redundancy provision and minus 21 percent to minus 26 percent
with a provision.

The move is designed to turn up the heat on the government
over the carrier's demand for an access "holiday" to justify the
proposed AU$3.1 billion spend on an FTTN that would cover around
87 percent of the Australian population.

The Minister for Communications, Information Technology and
the Arts, Senator Helen Coonan, told a conference on 14 December
that the government would not legislate to give Telstra sole
rights to use the proposed FTTN network.

Senator Coonan said certainty was achievable within the
current telecommunications regulatory framework and said Telstra
could apply for an exemption from the access regime before
proceeding with its investment.

Telstra also said today it welcomed the government's reported
resolution to seek further information from the Australian
Competition and Consumer Commission on proposals by the
competition watchdog's for wholesale pricing arrangements for the
so-called Unbundled Local Loop (ULL).

However, the ACCC subsequently upped the ante, with chairman
Graeme Samuel publicly rejecting the carrier's proposed pricing for rivals to access the ULL -- the
unconditioned cable, generally copper pairs, between end-users
and a telephone exchange -- as "too high".

The ACCC said today it would inquire into the regulatory needs
for fixed telecommunications services and wholesale services in
light of technological change.

Telstra's move 'political'
According to analyst group International Data Corp, Telstra's
announcement it would put a hold on its FTTN network was a
political move.

"They're trying to push the government against the wall, and
put as much pressure on the ACCC as they can," IDC's research
director of telecommunications and consumer markets Landry Fevre
told ZDNet Australia. "This is typical incumbent
bargaining."

The analyst said consumers would be the losers out of the
process.

"At the end of the day, Australian consumers will be in for
less attractive services, because there'll be less competition,
and the level of new product launches will be delayed," he
said.

However Fevre considers it "inevitable" that Telstra upgrades
its network. He pointed out competitors like Optus were currently
doing the same and Telstra must eventually follow other telcos
overseas and start offering ADSL2+, Voice over Internet Protocol
and IPTV services

"The writing is on the wall. It's just a matter of time now,"
he said.

Telecommunications analyst Paul Budde called Telstra's move a
"hollow threat" and said the heavyweight itself would be the
biggest loser if it delayed upgrading its network.

"They have underinvested in their last mile/customer access
network for over 15 years and they will not be able to deliver
new services they need for new revenue streams unless they
upgrade their network first."

"Further delays will also allow others to progress their own
infrastructure developments independent from Telstra," he
said.